Gold is at an interesting point in time and is facing a number of headwinds

·North Korea has gone quiet in terms of missile and nuclear tests

·While the Trump Administration is threatening even more sanction against Iran, it’s not labeling the Revolutionary Guard a terrorist organization

·The US Dollar is for the moment at least gaining against a basket of currencies

·The European Central Bank and Bank of England are going to announce their monetary policies this week

·Japan’s Prime Minister Abe won an important election on Sunday that should result in the Bank of Japan maintaining an easy money policy

·The US Federal Reserve is very likely going to raise interest rates by a quarter point in December

Before November 3rd, President Trump is going to announce his choice for the new Federal Reserve Chairman. It seems a three-person race between Janet Yellen, Jerome Powell and John Taylor., Gary Cohn and Kevin Warsh seem to be getting distanced by the front 3.

I don’t see a lot of difference between Ms. Yellen and Mr. Powell. Mr. Taylor comes with baggage called the “Taylor Rule” which I think puts him in the hawkish camp. In terms of least market reaction, keeping Ms. Yellen on, which means no change at the top of the Fed, would produce the smallest market reaction.

Inflation

As you already know inflation continues to be a laggard in Europe and the US. Wage inflation especially. According to the Taylor Rule we should have already seen inflation pressures on wages both here and in Europe, but that’s not what’s taking place. Central bankers use the term “transitory” to explain away the lack of inflation. If you use the term year-over-year you’ll eventually be right As one of my fellows on Fox Business TV says; “Even a broken clock is right twice a day”.

Chart action

Longer Term Weekly Chart

As I see it, the near-term fate of gold depends on whether prices close over 1301.5, or under 1271.6

Over 1301.5

Assuming prices don first close under 1271.6, the chart pattern on a close over 1301.5 would create a bullish pattern of higher lows and higher highs. The low being 1271.6 and the high being 1301.5. If prices close over 1301.5, the previous high close of 1347.3 would be a potential upside target.

Under 1271.6

Assuming prices don’t first close over 1301.5 and close under 1271.6, this sets up a test first of the 1260 price level and from there a potential test of the 1200 level. Keep in mind that the current chart pattern is one of higher lows, with the most recent low of 1271.6 being higher that the low close back in early August. The pattern currently has a pattern of lower highs, 1347.3 and 1301.5. Therefore we have higher lows and lower highs. A break under 1271.6 would create a pattern of lower highs AND lower lows.

Seasonality

In the above chart, courtesy of Moore Research Center, Inc., I’ve spotlighted October 24th. Regardless of whether you view the 5-15 or 30-year time frame, all typically find reason to bounce at this time of year. A bounce is not necessarily a trend change. In fact, only the 15-year time frame embarked on gains into year end. Most of the time, after a brief bounce, prices slipped back into late November.

Commentary

It may not look like it but the longer-term charts are about to decide what next for gold. I will keep you informed.

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